Thematic (Sector/Industry)

• OVERSEAS.  Surge in Jobless Claims lifts Bonds,  rejuvinates Tech, and pushes SPX into Bull market territory ; Fed PAUSE seems a done deal; Another win for TESLA-GM joins Ford
• JAPAN. NKY Futs +0.6% vs Cash; After yesterdays, stunning Value vs Growth reversal, now look for the reversal of that reversal !   Major SQ today. Remain bullish Japan.
• NUGGET. Embrace Activists – Says JPX CEO.  JPX playing their part; Investors doing their part. Corporates, your turn…still a lot to do..

• Despite solid 1Q23 result, share price performance for China’s tourism and hospitality companies has been unexciting. This is unjustified and we expect a pick-up going forward.
• While their earnings multiples are high at 31.0x and 21.6x for FY23 and FY24 respectively, they should be interpreted in the context of impressive FY23-24 average EPS growth of 51.4%.
• Anecdotal evidences showed that positive momentum will sustain – Tongcheng Travel Holdings (780 HK), Trip.com (9961 HK), H World Group (1179 HK) and Fosun Tourism (1992 HK) will stay as beneficiaries.

• Luxury stocks have been a key way for investors to play China reopening. The play on the rebound has clearly paid off.
• European luxury companies, such as LVMH, Hermes, Richemont, Kering, and others, are seeing strong demand, somewhat dusting off Chinese data concerns.
• However, data coming out of China is somewhat concerning. April shaky, May better.

• AMZN/PDD/ Shein:  Amazon temporarily display the same discount and coupons (-)
• FUTU: HK stock turnover remains lukewarm, while Futu is gaining market share in HK（-）
• PDD/Shein: TikTok launching “Mall” and “fully managed” model in the USA and UK (-/-)

• OVERSEAS. SPX fell -0.4% as UST Yields rose on back of surprise Canada hike; US swaps now pricing 67% Fed June skips vs 77% before;  China Exports Collapse in May
• JAPAN. NKY Futs -0.2% Discount to Cash;  Likely Consolidation in Japan today with Tech weakness; Govt Passes Defense Bill to support Industry profits; SBI HD to start Carbon Trading Exchange
• NUGGET. M&A Research (9552) -AI Driven Ways of Doing Old things in helping to solve the critical succession problem plaguing Japan’s SMEs

• The Fed is likely to present a new direction for regulation by the end of this month according to sources.
• A 20% increase in capital requirements for bigger banks is being pondered, but how will it impact liquidity and credit in case?
• The end-game is likely increased buffers and bond/cash holdings of banks. Bad for credit and lending growth but good for Government Bonds.

• New RBA rate hike puts increased pressure on banks, furthering rift between banks
• ACCC deadline to approve ANZ’s takeover of Suncorp Bank is moved to 28 July 2023
• Significant change in Australian banking metrics from July 2022 takeover proposal

• We continue to chat with venture capitalists (VC’s) and hedge fund managers in our tour of China.
• Our takeaway is that Chinese government intend to nurture local governments into VC’s to (partially) replace land finance as a pillar of fiscal revenue;
• The resulted policy measures and shifts will benefit STAR SSE as a politically oriented destination and EV/renewable sectors as national championships, at the expense of the consumer sector.

• Some Japanese department stores enjoyed record sales in FY2022 but the gap in performance accelerated between city centre stores and the rest. 
• While numerous regional properties continue to struggle, the best exemplars of urban department store retailing are flourishing as they become true luxury emporiums for the wealthy.
• Department stores have rarely provided growth in either sales or OP but there is now a chance that the better chains will emerge as quite profitable entities.

• KE Holding: China State Media call for loosening on purchase restrictions in 1st tier cities (+)
• NIO: NIO to launch ET5 Touring on June 15（ +）
• JD/ BABA/ PDD: Douyin launches self-operated (1P) ecommerce store (-)

• OVERSEAS.  SPX +0.2% as Investors Buy Financials; Semis regained some of its mojo as SOX rose 1.3%; Fed remains in Focus; Boeing glitches;  All Telsa cars qualify for IRA benefits
• JAPAN. NKY Futs +0.4% vs Cash; Relentless bid in JP equities continues – yesterday ignoring US weakness on Monday; JP Govt tgts 3x rise in Domestic Semi Sales by 2030.
• NUGGET. Japan revamps its semi strategy – aggressive targets to get to ¥15 trillion in domestic sales by 2030, while being the key in the global semi supply chain.

• Why – even after successive cuts – does crude oil keep settling on a $70 barrel? 
• The conundrum has pitted the OPEC+ alliance against each other. Suspicious eyes are turning inwards, trying to sniff out the mole who is free-riding on the collective. 
• Will the imposter be detrimental to Saudi’s production cut strategy?

• LKNCY: Luckin Coffee opened No.10k store, and extended discount coupon coverage (-)
• U US: Apple provides Unity with unique development privileges for Vision Pro (+)
• CPNG US: a congestion in the customs clearance process at Pyeongtaek Port due to a surge in packages from Chinese e-commerce platforms.(-)

• The precious metals and base metals markets were down in the month of May, however, we view this as a healthy pull-back following two strong months in March and April.
• M&A remained elevated in the month following what appears to be the peaking of rates and inflation, and persistent elevated metals prices.
• Sentiment Update Following two very strong months in March and April (Gold, Silver, and the GDX were up 8.6%, 19.3%, and 18.9%, respectively), precious metals took a breath and were down slightly in the month of May.

• OVERSEAS. US Rally Pauses as weak(er) Services ISM brings recession risk reminder; MS Big Bearish Call on SPX; Apple unveils Game Changing VR Headset ; Crypto Worries -Binance CEO Charged
• JAPAN. NKY Futs -0.3% vs Cash; Expect a pull back today given US pause, overbought markets, and stronger yen;  MS Bullish Call on Japan; Panasonic expands Battery production for TESLA
• NUGGET. Data Centers – Demand set to Explode with AI: Next Growth Driver for an Already undervalued Kansai Electric ?

• The extent to which Smartphone & PC unit shipments will rebound in H2 is as yet unknown. 
• Most semi companies forecasted a muted H2 recovery. After earnings, we downgraded our FY’23 outlook for Foundry, PC, Smartphone and Silicon Wafer segments.
• Many semi stocks are priced for a H2 rebound that’s proving notoriously elusive but there are still some bargains to be found

• We recently conducted interviews with some Lazada merchants to understand the upcoming large-scale launch of the fully managed model, also known as the Choice channel. 
• 1) Lazada considers the fully managed model as a centralized channel for cost-effective products; 2) Lazada prioritizes market share and aims to ensure orderly operations of its fully managed model.
• We project Lazada is seizing the opportunity to capture Shopee’s market share while Shopee is more focused on profitability. We maintain SELL for SE and BUY for BABA and PDD.

• Tencent/700.HK: new promotional video for “HoK(Honour ok Kings) World” is released
• Douyin/Meituan/3690.HK: Last week, the “Douyin Sales Assistant” app was launched
• XPEV/1211HK/TSLA/LI/NIO: China to extend purchase tax exemption for NEVs (+/+/+/+/+)

• OVERSEAS.  US Equities Soar on Debt Resolution and Payrolls; Markets continue to price in Fed Pause; Leaks about China Property stimulus support sentiment; Saudi Arabia slashes oil output.
• JAPAN. NKY Futs +1.4% vs Cash;  JP bid to continue after US Rally; Inflation pushing households to stocks; Japan prioritizes hydrogen; Companies face a raft of proposals at June AGMs
• NUGGET. Where Nvidia Goes, Advantest Follows; Advantest now simply just a proxy on Nvidia’s share price

• As Rmb moved from appreciation in 1Q23 to depreciation in 2Q23, there is a total change in the beneficiaries discussed in China Strategy: It Is the Foreign Exchange Impact, Stupid! 
• The new beneficiaries are CIMC Enric Holdings (3899 HK), China Energy Engineering (3996 HK), China Communications Construction (1800 HK), Sinotrans (598 HK) and AviChina Industry & Technology H (2357 HK). 
• CIMC Enric Holdings (3899 HK) generated 20.2% of FY22 earnings from exchange gain as Rmb depreciated. Revenue from outside China rose 10% in 1H23 and accounted for 54.4% of total.  

• The risk now for US banks is sharply lower net interest income growth, some turning negative
• Ally Financial, First Republic, and Pacwest are the only 3 majors that show this in 1Q23
• Weekly balance sheet data paints a subdued outlook, especially for small US banks

• To mix it up this week, I am going to journal out the top chart patterns I generally look for when scanning and reviewing charts.
• This post will also include some examples of price action that I typically look for, coupled with fundamental research, which has yielded the best entries and results over the years.
• For starters, I focus on weekly charts to eliminate the noise of the hourly and daily charts which allows for confirming whether the name is in a strong uptrend (defined as above both rising 10WK/40WK moving averages).

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, William Keating. William will be sharing with us his insights on the semiconductor industry and where it is heading. From trends in the industry, its current opportunities, and the road that lies ahead, join us as we hear more from William.

The webinar will be hosted on Wednesday, 07 June 2023, 17:00 SGT/HKT.

William Keating is a highly experienced senior executive with over 25 years experience in the IT/Semiconductor Industry. The majority of Dr. Keating’s career was spent at Intel Corporation where he held senior leadership positions in Europe, the US and Asia from 1992 through 2014. Since leaving Intel in 2014, Dr Keating established his own Technology Research & Consulting Company (www.ingenuity.hk) where he focuses on the products, roadmaps & technologies of companies, as well as the key equipment suppliers to those companies. Dr. Keating specializes in niche topics of high significance within the semiconductor industry. These include the future of Moore’s Law and in particular the significance of Lithography in maintaining Moore’s Law (EUV, SDA, NanoImprint), the role & growth of the GPU in specialised applications such as Deep Learning (Neural Networks) for Voice, Image & Pattern recognition at companies such as Facebook, Google & Baidu. He also holds regular discussions on the future of memory, in particular the rise of 3D NAND and the emergence of new memory technologies such as 3D Xpoint.

• The Global Emerging Markets Weekly provides a summary of the key news and related developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.
• Macro data points: PMI data points for China, Taiwan, South Korea, Thailand, the Philippines, Malaysia, and Vietnam; Indian GDP growth.
• Companies mentioned:Mediatek Inc (2454 TT), NVIDIA Corp (NVDA US), JD.com Inc. (9618 HK)

• We highlight 14 stocks in Thailand that look interesting to us based on our FVMR Methodology
• Portfolio changes: 10 stocks remain, four new join the fray
• Since inception, it has gained 115% versus the SET 100 Index’s return of 31%

• HK stock market rebounded strongly due to a few reasons, mostly macro and policy-related.  Macro factors and policies become primary share price drivers
• Investors can add more beta names (China Property Developers) and value plays (Hong Kong Developers) if they want to add exposure
• Among the listed universe, 688 HK COLI, 17 HK NWD, 101 HK HLP are key names with attractive upside

• Japanese equities had another good week with the TOPIX ending 1.7% higher
• Japanese stocks have outperformed global peers since May on strong domestic earnings, a weak yen, and enthusiasm over artificial intelligence. 
• Softbank seems to be one of the AI names. Activist campaigns now in full flow ahead of AGMs

• LI/NIO/XPEV: Li Auto, NIO and Xpeng announced May vehicle delivery results (+/-/)
• XPEV: Xpeng to begin presale for G6 on June 9 (+)
• KE Holding: Monthly housing transactions remain resilient in May (+)

• OVERSEAS. SPX +1% as Cyclicals rose on Congress Debt Limit Deal; NFP in focus & implication for Fed June pause; Dollar General -20%..US consumer headwinds; Boeing scraps next-gen aircraft.
• JAPAN. NKY Futs +0.8% Cash; Stronger Yen but expect strong equity open on US rally; Foreigners bought Equities for 9th week; Panasonic sees EV battery Sales at 2.5tril by 2030
• NUGGET. The 2nd round of Off-shore wind auctions will conclude at the end of June. This will mark the (re) start of Japan’s aggressive push for wind.

• Watch out for the OPEC meeting this week as desperation can become the killer of solidarity 
• Easing energy pressures lending a helping hand to the EM space
• Industrial metals is loudly screaming for more Chinese credit impulses   

• Our recent interviews with Shein’s 3P merchants suggest that Shein’s newly launched 3P businesses, which include ODM and marketplace models, are specifically targeting Temu and Amazon, respectively; 
• Currently, most merchants have expressed a positive attitude towards Shein’s 3P business due to the large traffic and reduced competition resulting from its high entry barriers; 
• While we believe that PDD may face increased competition, we maintain a long-term BUY rating. Additionally, we anticipate that Shein’s 3P expansion will gradually affect Amazon and Shopify.

• 700.HK:  Supercell’s new game Floodrush receives unenthusiastic reception ( – )
• 3690.HK / TCOM: Douyin launches new hotel booking feature (-/-)
• LI: Li Auto’s daily order volume exceeds 1k for three consecutive weeks (+)

• PDD: Pinduoduo starts its “618 Opening Red” campaign, investing 5 billion RMB and offering subsidies for 4 consecutive days
• Tencent: Streamers and players indicate that there have been a large number of AI-controlled bots appearing in the matches of the game “Honor of Kings”.
• LKNCY: COTTI Coffee opened its No.3000 stores, and Luckin Coffee is going to open its No.10k store.(/)

• OVERSEAS. SPX ,-0.6% overnight, manages +0.3% for May; Debt Ceiling Passage on Track; 2 Fed Officials express dovish view; Weak China Factory PMI puts a Damper on Sentiment
• JAPAN. NKY Futs -0.4% vs Cash; JP Equities Best Globally in May; USDJPY strenghtens after intervention warning; Bullish Daikin MTP growth plan; JP Autos rank worst in BEV transition ranking
• NUGGET. Revisiting our thesis on Seiko Epson in light of HP Inc(HPQ) 2Q earnings and IDC April report on PCs

• In this insight we reviewed what’s happened recently in China and caused the sentiment in the equity market to further deteriorate
• Despite corporate deliver solid earnings growth in Q1, sentiment is weak and market concern is on LT fundamental headwinds such as economic growth, LGFV debt, property downturn and unemployment
• Some sectors are trading at historical low valuation (property trading at 0.1 – 0.2x P/B), part of the risk is priced in.

• Auto experts and industry executives in China are calling on regulators to explore a market-based approach to governing electric-vehicle (EV) makers’ manufacturing qualifications.
• The sector confronts an influx of inexperienced and ultimately unsuccessful firms amid the country’s push towards electrification.
• The success of China’s EV industry has been widely viewed as the result of years of Beijing’s supportive policies, including the use of subsidies to spur demand, and instruments such as a strict permit system to better manage capacity.

• OVERSEAS. SPX Flat after Memorial Day; AI/Tech still strong, but momentum fading; Debt Ceiling Vote on Tap – as Republication far right protests deal; Crude -4% on OPEC/USD Debt Uncertainty
• JAPAN. NKY Futs -0.6% Discount vs Cash;  Yen weakness a concern-Officials vow to act;  Toyota gives Up on Hino – Welcomes the Germans
• NUGGET. The New JPX150 Index-Interesting Concept. We are hopeful that it will incentivize the numerous low PBR companies to take proactive steps to join the “elite” group of value creators.

• NTES: NetEase testing a new magic academy simulation game in Japan (+)
• PDD: PDD officially launches 6.18 event, but there aren’t many surprises (-)
• NIO/LI: NIO announces pricing details of all-new ES6 (- / +)

• Going into a third week after Thailand’s general election on May 14th, the Thai stock market softened and the bond yields rose on uncertainty over the government coalition.
• We believe the Move Forward Party (MFP)’s victory signifies a movement to reform, not just a political campaign.
• The muddle-through scenario could see Thailand without the new government until May 2024

• According to data, the accumulated balance of medical insurance fund has increased significantly. The core reason of China’s medical insurance fee control is to leave room for upcoming difficult period.
• The NHSA believes that even under fee control policy, pharmaceutical companies should still be able to achieve good performance. Perhaps companies should review their own problems more than blame policies.
• The pricing system in NRDL negotiation has its logical, and the total size of drug market in China reaches several trillion yuan, which is quite large.Why should we be pessimistic?